Economics Roundtable

NOTICE 9/30/177

The Economics Roundtable website has been up and running for a couple of days now. Further periods of testing will be necessary. The RSS feed is still not working. The left sidebar links are also probably not updating correctly.

The problems were caused by updates to the programming language php and to the Apache operating system. It is taking time to track down the problems this causes with my system. - Bill Parke

March 2017 Fed Funds Rate

What is the effect of a 0.25% change in the Fed Funds rate?.

Click on the image to get a bigger version.

March 2017 Payroll Employment

Payroll employment has not grown impressively since 2000. Some baby-boomers retired, but that does not totally account for this graph.

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May 2014 Payroll Employment

After 76 months, we finally got back to the prerecession level of payroll employment.

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The best summary of the state of our economy is the graph (below) of employment as a fraction of population for people over 16 years old. The decrease is large, but the most troubling feature of the graph is the flat trend .

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Graph-of-the-Year Candidates

Donald Marron likes European interest rates. Click on the image to get a bigger version. Can you find three distinct subperiods?

Brad DeLong favors the U.S. gdp gap.

Remember M1?

Money Supply M1 growth is now over 20% per year over a 12 month lag. M1 growth has touched 20% before, but not with excess reserves of $1.6 trillion. Where is M1 headed?

Click on the chart for a larger version.


The Economics Roundtable is sponsored by EconModel.

The Classic Economic Models cover micro, macro, and financial markets.

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Fama/French Forum

""ideas and observations from Fama and French”

September 22, 2017, 7:25 pm, 1778668
Does it make sense to dollar cost average? It depends. Standard financial analysis says dollar cost averaging is suboptimal. If you focus on only your investment outcome, investing a lump sum immediately lets you construct the best portfolio you can today; slowing the process with dollar cost averaging just keeps ...

September 22, 2017, 7:25 pm, 1778669
Although it would be great if we could all hire above average active managers, that only happens in Lake Wobegon. Superior managers may exist, but most investors might as well be picking their managers at random. I describe the challenge of differentiating luck from skill, and explain how intense competition ...

September 22, 2017, 7:25 pm, 1778670

September 22, 2017, 7:25 pm, 1778671
KRF: I explain why active investing is always a negative sum game. We often hear that now is a good time (or a bad time) for active investing. That does not make sense. In aggregate, active investors always underperform by their fees and expenses.

September 22, 2017, 7:25 pm, 1778667
Investors may doubt the usefulness of diversification after the recent market decline. In this video, Kenneth French explains that diversification cannot reduce the volatility of the overall market, but it is still important because it reduces the risk associated with individual firms or asset classes. He also discusses the perception ...

September 22, 2017, 7:25 pm, 1778666
The answer depends on why stockholders want to leave the market. During the financial crisis, some investors discovered that their tolerance for risk is lower than they thought, so it might make sense for them to permanently reduce their exposure to equities. Investors who wish to avoid the price impact ...

September 22, 2017, 7:25 pm, 1778663
From the American Finance Association's "Masters in Finance" video series, Eugene F. Fama presents a brief history of the efficient market theory. The lecture was recorded at the University of Chicago in October 2008 with an introduction by John Cochrane.  (View the video)

September 22, 2017, 7:25 pm, 1778664
In an interview conducted by Professor Richard Roll, famed University of Chicago economist Eugene F. Fama discusses his life, research, and contributions to the field of finance. Produced by Dimensional in conjunction with the American Finance Association. Directed and edited by Gene Fama Jr. (View the video)

September 22, 2017, 7:25 pm, 1778665
Widely cited as the father of the efficient market hypothesis and one of its strongest advocates, Professor Eugene Fama examines his groundbreaking idea in the context of the 2008 and 2009 markets. He outlines the benefits and limitations of efficient markets for everyday investors and is interviewed by the Chairman ...

September 22, 2017, 7:25 pm, 1778662
EFF: I was interviewed on CNBC's "Squawk Box" this past Friday about the recent financial crisis and financial regulatory reform. View the video here.